Date:  11 March 2009

FRAUD WARS  - THE INSURERS STRIKE BACK

Two Recent Fraud Cases

Coincidentally, both of these cases were heard within a week of each other last July by two different High Court judges sitting in the Royal Courts of Justice. 

Both arose from motor claims, but the principles apply equally to any form of personal injury claim against a negligent third party. 

The first case is WASIM UL-HAQ, SAMARA KHATOON & ZAHIDA PARVEEN –v- ANITA SHAH [2008] EWHC 1896 (QB), in which Mr Justice Walker was considering an appeal from Birmingham County Court in an ostensibly straightforward claim for damages allegedly suffered by the three claimants (husband, wife and mother travelling together) in a road accident in May 2006, caused by the defendant’s admitted negligence in driving into the back of their car.

In a nutshell, Ul-Haq and his wife Mrs Parveen undoubtedly suffered minor whiplash injuries and were awarded damages of £2,585.38 and £2,259.37, respectively. 

The crux of the case centred around the mother Mrs Khatoon, who allegedly suffered similar injuries, but the trial judge found as fact that she was not a passenger in the car and that her claim had been fraudulent.

The trial judge dismissed her claim and ordered her to pay indemnity costs to the defendant assessed at £2,666.  He also concluded that the deceitful conduct of the two other claimants in supporting the mother’s fraudulent claim made it appropriate that each should pay 2/3rd of the defendant’s costs of defending their respective claims assessed on the indemnity basis at £1,777 each.  The total costs payable by all three claimants to the Defendant thus totalled £6,220.

Although Ul-Haq and Mrs Parveen obtained judgments for their injury claims totalling £4,844.75, these sums were to be set off from the costs payable to the defendant, leaving a net balancing sum of £1,375.25 payable by all three claimants to the defendant.

Rightly, you may think, they recovered nothing from the litigation, but the defendant’s insurers were not satisfied with this result, and appealed to the High Court, their contention being principally that the claims of Ul-Haq and his wife should have been booted into touch under CPR3.4 (2) which says amongst other things that the court can strike out a claim if it appears that it:

“is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or that there has been a failure to comply with a rule, practice direction or court order……….  When the court strikes out a statement of case it may make any consequential order it considers appropriate……….”

Unfortunately, there is insufficient space here to consider all the points.  Mr Ralph Lewis, QC for the insurers submitted at the appeal that there was a significant difference between dishonestly exaggerating or over-egging your claim on the one hand and otherwise pursuing litigation which had been cynically engineered to encompass and conceal a spurious claim by an additional “party”.  The first involved straightforward mendacity, whilst the second was an abuse of process.

Walker J adjudged that the starting point was to consider the extent to which there had been a breach of the overriding objective and then in the light of that conclusion to consider exercising the court’s discretion to strike out a claim under CPR3.4 (2).

On the facts he found that Ul-Haq and Mrs Parveen had clearly participated in the fraud but he could not say that they had instigated it. 

In terms of his discretion, the award of indemnity costs against the three claimants led to an overall result in which Ul-Haq and Mrs Parveen got no benefit at all from the case, and were liable to pay a net balance to the defendant - on top of their liability for their own legal costs.

The trial judge made a finding that both had suffered genuinely minor injuries in the accident.  The fact that they had lied in support of Mrs Khatoon’s fraudulent claim did not prevent the trial judge from concluding that they had themselves suffered injury.

“Weighing all these factors, I consider that this is a case where the lies about Mrs Khatoon had no substantial impact on the court’s ability to resolve the case fairly ……… their lies were extremely serious for the reasons I have given, however, they did not involve conduct falling squarely within a category which could be described as of the worst kind  ……… (the result) effectively forfeits their genuine claims to damages ……… in my view this outcome justly reflects the seriousness of their breaches of the overriding objective, and there is no additional need to strike out their claims.  The upshot is that I consider it right to make the order which was in fact made by the judge.” 

The other case is JOANNE KIRK –v- CAROL WALTON [2008] EWHC 1780 (QB), which also happened to arise from a rear end motor shunt, but could equally have applied to an employer’s liability claim.

The claimant was a university administrator who suffered a typical whiplash type injury in the accident on 14th September 2001; but she had the complication of a history of back problems.

Many of us have seen cases like this before.  Her symptoms seemingly got worse and in October 2002 she gave up work altogether.  In January 2005 her solicitors served a schedule of damages claiming over £800,000 including substantial sums for past and future lost earnings, as well as damages for care and assistance.  Presumably, this figure was in addition to her claim for general damages.

By then the defendant’s insurers had started to smell a rat.  Presciently they paid £25,000 into court on 16th February 2005, in addition to which there was a repayment due to the Compensation Recovery Unit about £9,000. 

Medical evidence was subsequently obtained and exchanged. The claimant’s expert diagnosed significant disability developing into fibromyalgia, whereas the defendant’s expert opined that there was nothing but exaggeration. 

The defendant’s insurers later commissioned video footage of the Claimant apparently behaving normally on a day to day basis, contradicting some of her evidence given in her particulars of claim and witness statements all signed by her with the usual statement of truth. 

The proof of the pudding must have been in the eating, because by consent the claim was settled on 26th June 2007, whereby the claimant accepted the £25,000 standing in court on the usual terms as to costs whereby she was penalised by having to pay all of her own costs, as well as the Defendant’s costs, from a day 21 days after the money was paid into court - some 2 ¼ years previously.

Normally, that would have been an end to the matter, but presumably because the defendant’s insurers had had enough of the time, trouble and expense caused by this particular claimant, or indeed of claims of a similar nature, they took the brave step of instigating contempt of court proceedings against Mrs Kirk – requiring a transfer of the case to the High Court and an application for permission from Mrs Justice Cox. 

The case, therefore, moved into the realms of a criminal prosecution for contempt, whereby the applicant who prosecutes this step must prove to the criminal standard of beyond all reasonable doubt that the individual knew what she was saying was false and that her false statement was likely to interfere with the course of justice.

In terms of the application for permission, Cox J said that there must be a strong prima face case shown against the Claimant “but that I should be careful not to stray at this stage into the merits of the case; that I should consider whether the public interest requires the committal proceedings to be brought; and that such proceedings must be proportionate and in accordance with the overriding objective.”

The preliminary point of the claimant’s leading counsel was that there was no jurisdiction for contempt proceedings after the settlement of an action upon agreed terms and by consent. He said that she should not have to face committal proceedings in satellite litigation which come close to an abuse of the process.

Cox J did not accept this submission.  “the context for this application is a particularised schedule of damages in which ……… this claimant was seeking to recover over £800,000 in damages from the defendant’s insurers.  The allegations are in my view sufficiently serious as to merit such proceedings being brought in the public interest and, having regard to the overriding objective, are proportionate in the circumstances.

 There is, in my judgment,  a strong public interest in personal injury claimants pursuing honest claims before the courts………For all these reasons I grant the Defendant’s application and will now ask counsel for both parties to endeavour to agree appropriate directions for the hearing ……….”

Since writing the above I have discovered that the contempt proceedings are to be heard later on this month in Liverpool before a High Court judge.  The defendant's insurers have brought this matter by way of a private prosecution against Mrs Kirk because apparently attempts to persuade the Attorney General to intervene in similar cases have been unsuccessful.

Geoff Lewis